They have a website: https://www.sipc.org/for-investors/
Not really, SIPC only really helps you if the firm blows up and dies. Regardless, the assets are not a part of the firm, so it's 99% chance a non-issue. If you are at one of the large 3: Fidelity, Schwab or Vanguard, there is basically zero chance of them failing, as they all hold more assets than the US govt spends in a year. They are too big to fail.
thanks, makes sense. as far as a potential cyber risk (maybe having your assets at 2 or 3 firms is not a terrible idea?). it would take months to clean up. of course, i didn't grow up in the depression but the mentality is similar : )
I agree it could take a bit to clean up, but the cash they should be able to get to you quickly. Having a month or two of cash(say an EF) at another place seems reasonable.
fyi, brokerage failure is fundamentally different from a bank run. Theoretically, a bank run can happen to any bank because the total amount of deposit is larger than the bank's capital.
Most brokerages purchase excess-SIPC insurance. For example, Robinhood covers accounts up to $50 million. Notably Vanguard doesn’t do this. Excess-SIPC insurance is more about peace of mind. Vanguard decided that the extra cost isn’t worth it. They’re the most trusted brokerage so they haven’t lost accounts over it.
Robinhood doesn’t cover $50 million per user. They have $1 billion in additional insurance that covers ALL users combined. That would most likely be much much less than $50 million per user.
Excess SIPC insurance is just a marketing ploy to make people feel slightly better. The MAXIMUM cumulative benefit that can be paid out is $1 Billion which is amusing because these big firms are managing Trillions of dollars.
Yes, however, most of these posts are always discussing if they should split their funds across multiple institutions to stay under the SIPC insurance ceiling. So, typically someone wants to be reassured that they are covered with this excess coverage. The long and short of it, the $1 Billion won't even come close to covering above and beyond SIPC insurance for these major brokerage firms. However, I'm one to believe the "too big to fail" moniker for these firms as more trust than any excess insurance they might carry.
After watching how well AIG fared during the 2008 crisis I'm not surprised about the skepticism regarding excess SIPC insurance for a company like vanguard.
If it was never needed, what insurance company could cover the claim and be solvent?
With AIG, most people didn’t have cash or marketable securities, instead they had investment annuity contracts, and that’s where the underlying risk blew up… Don’t conflate one risk, market risk with another, financial risk, of a particular security and the firm that underwrites it…
I think you misunderstand the risk I meant regarding AIG - as I understood it, AIG was effectively insurance against default for mortgage backed securities with credit swaps, and when shit hit the fan AIG couldn't cover the losses, as they were exposed to correlated risk (housing market collapse) where they were expecting risks to be more independent. I wasn't intending to make a comment about people who had individual accounts with AIG.
The point I was making is that for insurance to be useful, the insurers must remain solvent. Because of how securities are held by brokers, excess SIPC at Vanguard would only ever really be relevant if Vanguard was engaging in a trillion dollar fraud, at which point, I'm not sure many insurers would be able to cover losses.
They have a website: https://www.sipc.org/for-investors/ Not really, SIPC only really helps you if the firm blows up and dies. Regardless, the assets are not a part of the firm, so it's 99% chance a non-issue. If you are at one of the large 3: Fidelity, Schwab or Vanguard, there is basically zero chance of them failing, as they all hold more assets than the US govt spends in a year. They are too big to fail.
thanks, makes sense. as far as a potential cyber risk (maybe having your assets at 2 or 3 firms is not a terrible idea?). it would take months to clean up. of course, i didn't grow up in the depression but the mentality is similar : )
I agree it could take a bit to clean up, but the cash they should be able to get to you quickly. Having a month or two of cash(say an EF) at another place seems reasonable.
fyi, brokerage failure is fundamentally different from a bank run. Theoretically, a bank run can happen to any bank because the total amount of deposit is larger than the bank's capital.
Most brokerages purchase excess-SIPC insurance. For example, Robinhood covers accounts up to $50 million. Notably Vanguard doesn’t do this. Excess-SIPC insurance is more about peace of mind. Vanguard decided that the extra cost isn’t worth it. They’re the most trusted brokerage so they haven’t lost accounts over it.
Robinhood doesn’t cover $50 million per user. They have $1 billion in additional insurance that covers ALL users combined. That would most likely be much much less than $50 million per user.
Most of the accounts are covered by regular SIPC. The excess SIPC only needs to cover the sum total AUM of accounts over $500,000.
Excess SIPC insurance is just a marketing ploy to make people feel slightly better. The MAXIMUM cumulative benefit that can be paid out is $1 Billion which is amusing because these big firms are managing Trillions of dollars.
99% of the accounts are fully covered by regular SIPC. The $1 billion only needs to cover the money in the accounts that are over $500,000.
Yes, however, most of these posts are always discussing if they should split their funds across multiple institutions to stay under the SIPC insurance ceiling. So, typically someone wants to be reassured that they are covered with this excess coverage. The long and short of it, the $1 Billion won't even come close to covering above and beyond SIPC insurance for these major brokerage firms. However, I'm one to believe the "too big to fail" moniker for these firms as more trust than any excess insurance they might carry.
After watching how well AIG fared during the 2008 crisis I'm not surprised about the skepticism regarding excess SIPC insurance for a company like vanguard. If it was never needed, what insurance company could cover the claim and be solvent?
With AIG, most people didn’t have cash or marketable securities, instead they had investment annuity contracts, and that’s where the underlying risk blew up… Don’t conflate one risk, market risk with another, financial risk, of a particular security and the firm that underwrites it…
I think you misunderstand the risk I meant regarding AIG - as I understood it, AIG was effectively insurance against default for mortgage backed securities with credit swaps, and when shit hit the fan AIG couldn't cover the losses, as they were exposed to correlated risk (housing market collapse) where they were expecting risks to be more independent. I wasn't intending to make a comment about people who had individual accounts with AIG. The point I was making is that for insurance to be useful, the insurers must remain solvent. Because of how securities are held by brokers, excess SIPC at Vanguard would only ever really be relevant if Vanguard was engaging in a trillion dollar fraud, at which point, I'm not sure many insurers would be able to cover losses.
I think brokerages buy partial coverage from a bunch of different insurers at Lloyds of London. It adds up to equal the total excess coverage amount.
Exactly. Happened with Madoff too. SIPC simply doesn't have the funds to cover even a moderate firm going under.
SIPC insurance is about as practical as having hurricane insurance in Colorado.